The Canary Wharf financial district is seen in east Londonю (Reuters/Suzanne Plunkett) / Reuters

Britain’s financial system is “extremely” vulnerable to future crisis under current regulations, a new report warns. The New Economics Foundation (NEF) says the UK’s banking industry is the least resilient of all G7 nations.

The report warns the
resilience of Britain’s financial system has only slightly
improved since the 2008 crisis.

The NEF calls for sweeping changes to the UK’s banking sector,
including the introduction of more competition, separating retail
banks from investment banks and encouraging peer-to-peer lending.

Britain lags far behind all other members of the G7 group of
major advanced economies in terms of financial resilience, the
report found.

NEF ranked Germany as the group’s most financially resilient,
followed by Japan, France, Italy, Canada, the USA and the UK.

Germany was given a resilience rating of 73 out of 100, while the
UK scored 27. The US was the next worst ranked country, scoring
56 out of 100.

The study defines financial resilience as “the
capacity of the financial system to adapt in response to both
short-term shocks and long-term changes in economic, social and
ecological conditions while continuing to fulfil its functions in
serving the real economy.”

“Today we have a more concentrated and less diverse banking
system than we did before the crisis, still dominated by 5 large
banks with essentially the same business model focused on
short-term returns and real estate lending.”

“Serious structural reform, such as breaking up the big banks
in to regional SME-focused banks, is required to create a
stronger financial system,” he added.

Toby Greenham, Head of Economy and Finance at the New Economics
Foundation (NEF) said in a statement: “Without real
structural reform, we remain extremely vulnerable to future
financial storms.

“Yet even the limited progress made since 2008 now seems at
risk of being unpicked by lobbying from the big banks.

“Far from being done and dusted, banking reform is serious
unfinished business for the new government and there can be
absolutely no room for complacency,” he added.

Regulatory changes brought in since the crisis include requiring
banks to hold more capital and erecting a ‘ring-fence’ separating
retail and investment arms.

These new regulations are at risk due to lobbying from the
banking industry, Greenham said.

Speaking to RT, British economist Michael Burke said the report
“highlights the scale of the continued banking crisis in
Britain.”

“Nothing has been done about the too-big-to-fail banks, who
are increasingly dependent on speculation on the housing market
in a weak overall economy.”

Burke proposed full nationalization in order to bring the banks
under control.

He also called for capital limits to direct money away from
speculation and toward “productive investment,” and an
end to bonuses and shareholder dividends until the banks’ balance
sheets are “repaired.”

NEF call on regulatory bodies to separate high street banks from
investment banks, a policy US President Franklin D. Roosevelt
carried out during the Great Depression.

They also advise promoting bank diversity by increasing
competition in the sector and encouraging peer-to-peer lending,
where savers loan money directly to individuals or small
businesses.

President of Kellogg College at University of Oxford Professor
Jonathan Michie warned that rebalancing the UK’s financial sector
is as “important and urgent as ever.”

“Without serious and concerted action, we risk sleepwalking
into another financial crisis,” he said.